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How to redeem reward points of banks

Imagine if you would be able to reduce the electricity bill charges by some reward points, or you would be able to get a good discount on the purchase of mobile phone, this may sound weird but it is very much possible with your savings account. Some of the banks are even offering cash discounts these days, which get added in the savings account after every purchase. Initially, this system was adopted for payments via credit cards, but now-a-days, this is also available for saving bank accounts holders.

The purpose of rewarding the client is to motivate him in favor of online/internet banking. The process of brick and mortar banking is always costly to the banks than online banking. This is the reason why banks promote online banking for daily transactions which earlier needed you to visit the bank. Banks are now being connected via suitable networks so that the information is available and accessible to a person sitting at his home and clicking on the bank‚Äôs website. This decreases the transaction costs, delivery costs, and other administrative expenses. The customers are therefore passed on this reduced operating cost in the form of reward points.

Types of Reward points:

There are generally two types of rewards given to the customers. One is known as point based rewards, similar to hotel booking and airline booking. This means that after collection of suitable points, you can redeem them for your benefit and can purchase products linked to the bank website for discounts.

The second type of rewarding system is to offer higher interest rate or cash transfer to the account. For example: State Bank of India offers redemption for minimum of 400 points for cash back. ¬ Each activity generates some reward points, like for IPO subscription through SBI online banking, 4 points is given as a reward.

For RTGS/NEFT transactions, 5 points are given, and for IRCTC ticket booking 10 points are given. Like this, some other activities are also noted by the bank. The monetary value of each reward point is Rs 0.25 paise. This means, on redeeming 400 points, you get 100 Rupees as cash back.

In some banks, the reward points are being stated in the bank statement. All you have to do is to select the option given in the website of the bank for redeeming the reward points. Like in ICICI bank, they have online partner websites whose links are available, like for holiday booking they have makemytrip¬†as an online partner. You will have to choose the best option for yourself and the points will be utilized to discount the particular billing or item purchased by you.

Eligibility:

The reward points are not required to be subscribed separately; most of the banks are giving these facilities when you open an internet banking account. However, a minimum balance is required to be maintained by the customers.

How to choose?

Reward points cannot be the only criterion for choosing your savings bank account; it can be one of the criteria though. However, if a person is a frequent flier or goes to restaurants more often, it is important that he looks for a card that caters to his needs. Reward points in the form of discounts on these services will be beneficial rather than a card that does not take these into account.

All in all, reward points are like an additional benefit which you get apart from the services of the banks and the interest rates offered to you. Switching to online payment mode from traditional banking can save you lot of time and can also reward you with some cash backs, discounts, and other attractive offers.

About Post Author

Amit Sethi is an MBA (Fin) graduate and a Financial Consultant cum Entrepreneur. He has spent over 10 years in Equity research, Stock broking and Financial Consultancy Sector. He also writes articles for Times of India and some other prominent newspapers in India. In his free time, Amit likes to spend time with family, play cricket and read books/magazines.